Aviva in £300m share buyback, to hike prices as FY profits surge 35%

UK insurer Aviva posted a better-than-expected 35% rise in annual operating profit and announced a £300m share buyback on Thursday, driven by a rise in life and general policy sales.

Profits for 2022 came in at £2.2bn against a company-compiled consensus of £1.75bn and a total dividend of 31p a share was declared, in line with expectations. Aviva upgraded dividend guidance to low-to-mid single digit growth and chief executive Amanda Blanc warned of higher premiums this year.

The solvency ratio, a major measure of capital strength, fell to 212% from 244% the previous year. After a pension scheme payment and investor payouts, this fell to an estimated 196%, Aviva said.

General insurance gross written premiums increased 8% to £9.7bn, while the company's fund arm Aviva Investors reported external net flows of £1.3bn, down from £3.3bn.

Blanc said customers should brace for increases in the cost of cover after double-digit rises in 2022 as the company faced surging costs for repair bills.

New business premiums were hiked on average by 20% for motor cover and 13% for home insurance as it saw the cost of claims rise by 9 - 11% last year.

Blanc told the PA news agency that the group already had to increase prices by 5% in the first quarter of 2023 with further price rises to come as inflation remains intense.

It comes as insurers across the sector have been impacted by surging motor repair, parts and labour prices, which have sent claims costs rocketing.

The industry has also been under pressure amid regulatory scrutiny on renewal rates and car damage valuations, while last year’s freezing weather and winter storms have also added to claims bills.

Blanc said she was “optimistic” that prices will start to come down.

“We are still putting price increases through. But we’re optimistic that prices will come down. New car prices are reducing and hopefully the supply chains will open up.”

Reporting by Frank Prenesti at Sharecast.com